Founding a startup is an exciting time, and the adventure ahead will hopefully be one of the most enriching learning curves you’ll experience. But, let’s be honest, it’ll probably be a bumpy ride so it’s important to be as prepared as possible for those bumps in the road.
With the additional pressures of COVID-19 and lockdowns taking their toll on small businesses, a 2021 report by FSB estimates that 250,000 UK small businesses could shut up shop during 2021.
With that in mind, we’ve put together an overview of the top 10 challenges that startup Founders face to help your startup be one of the success stories.
A challenging climate for startups
The startup world is always a challenging one, full of unknowns and untread paths. And last year a record-breaking 770,000 new businesses launched in the UK, according to a recent study by Tyl by Natwest. With so many businesses hoping to take wings and fly, the competition can be extremely fierce.
But it’s not all doom and gloom. With the right attitude, proper planning and taking appropriate action, you can drastically increase the chances of your startup being successful.
A record-breaking 700,000 new companies were launched in the UK last year
1. Strength of your business model
Many startups will fail due to a poor business model. The overall concept of the business might be strong, but if the model it’s based on isn’t well thought-out or properly scalable then that can cause major issues.
A solid business model should include the following, equally considered components:
- Customer profiles – Be as specific as possible to narrow your audience down to two or three detailed buyer profiles/personas.
- Value proposition – Explain how your business will stand out and what it has to offer that is new or different to what’s already available.
- Revenue streams – Outline the various ways in which the company will make money, e.g. online sales, events, retail distribution, etc.
- Cost structure – It’s crucial that you have a thorough understanding of the finances of the company so that you can position costing appropriately to make money.
- Customer generation strategy – Be specific in how you plan to acquire customers, which channels you intend to use, and how you’ll build interest and convert to sales.
- Core processes – You’ll need to understand the key business activities needed to make your business model work, from ideation through to product/service delivery.
- Key resources – Provide details about what you’ll need to run the business day-to-day, e.g. website, warehouses, capital, etc.
- Key partnerships – Identify the network that your business will rely on to operate, from suppliers and wholesalers to logistics companies and marketing agencies.
It’s also important to leave room for your business model to evolve in the future. Business models are based on assumptions and ideology, which can often prove to be off the mark once the company is in operation. Once you’re up and running, review your business model regularly and make changes where needed.
Once you’re up and running, review your business model regularly and make changes where needed
2. Securing funding
Possibly the most important challenge you’ll face as a startup Founder is securing funding for the business. It can be a tough, gruelling process of endless applications, pitch meetings and frequent rejections on the way to securing investors.
Do your research to understand the most appropriate funding routes for your business. Read up on the business angels or funding circles you’re applying to, and personalise your pitch to resonate with them.
During this period of fund hunting, make sure you’re eating well, exercising and getting a decent amount of sleep to maintain your mental wellbeing. It will help your brain stay focused and you’ll feel better prepared to deal with the onslaught of interviews, rejections and interrogations you’ll be facing.
Do your research to understand the most appropriate funding routes for your business
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3. Financial planning
One of the most common mistakes made by startups is poor financial planning. Underestimating initial costs and ongoing expenses, and incorrectly pricing products/services can all be crippling during the formative months/years of a startup.
Do your homework to understand the reality of costs, and make sure you go into detail for all the outgoings you could face from the start. As well as the larger expenses (offices, salaries, stock, etc), the small items like subscriptions, registration fees and delivery charges can quickly add up too.
Once you know all of your costs you can then look at your pricing structure and strategy to ensure you’ll be covering costs and making a profit. And always build in contingencies for surprises that might crop up across all areas of the business.
Always build in contingencies for surprises that might crop up across all areas of the business
4. People and talent
The people you hire to join your startup will be hugely influential to the success (or failure) of the business. Take time to find the right candidates and be conscious of hiring a team that will work well together.
Once onboard, work closely with your employees to get to know their strengths and weaknesses. By establishing strong and open communication with your team, they can help generate ideas, identify potential flaws in plans and act as an effective sounding board.
If a team member decides to leave, make sure you replace them. Simply spreading a departing employee’s work amongst the team adds strain to the remaining team members and can negatively impact morale in the team.
Take time to find the right candidates and be conscious of hiring a team that will work well together
Many startups in the UK are tech startups. That means you’re entering into a hugely competitive market with some companies who boast big marketing budgets and bigger online followings.
Building an online presence takes time and dedication. Organic traction is particularly time-intensive, so you’ll need to be patient while you gain traction.
Engage with SEO and online marketing specialists to create the right strategy for your startup, striking up a balance between paid and organic channels.
As Captain of the ship, your team will look to you for strong leadership. You’ll need a clear vision and a company mission that you can easily articulate.
Once you have a clearly defined goal (or set of goals), make sure everyone is clear on their individual objectives and that you’re all heading in the same direction.
To help create a company culture that motivates your employees, invest time in nurturing a genuine team environment. For ideas on ways to motivate your team, read our 10 tips to motivate startup employees.
As Captain of the ship, your team will look to you for strong leadership
7. Market demand
A popular stumbling block for startups was the lack of demand for their product or service. To avoid this, make sure you do lots of research into the demand for the problem that your startup aims to solve.
You’ll need to make sure there’s an audience for your product/service, and a way to drive revenue from delivering it, in order to penetrate the market and achieve scalable growth.
“When I first started my business, I think the thing I lacked the most was real guidance on what steps to take and when to take them. I had an overall vision of what I wanted to achieve but being brand new into business, I didn’t necessarily know what I ought to do first to make it a reality. Looking back, some of the steps were obvious, others not so much – but had I had that guidance and structure from the start, I think I could have grown my business much faster.”
– Eddie Whittingham, FounderRead more
Planning, planning, planning. We can’t say it enough. A startup that thoroughly researches and plans across all aspects of their business will have a much higher chance of commercial success.
That means planning finances, your products/services, marketing, people, talent gaps and anything else you can think of. If possible, get business-savvy friends or family to review your plans and discuss with them. They may well spot gaps or have questions that you hadn’t thought of.
Planning also extends to your time. Keeping lots of plates spinning whilst trying to move forward can be challenging, and draining. Therefore it’s important to manage your time effectively, so ask yourself two key questions:
- What’s important right now?
- What will make the biggest impact right now?
Focus on these two areas as a priority, before moving on to deal with the other tasks on your (no doubt ever-growing) to-do list.
A startup that thoroughly plans across all aspects of their business will have a much higher chance of success
9. Scaling your business
Moving from a small operation to a business of scale is often the crunch point for many startups. A whole new set of challenges appear when you start growing at pace and need to meet the demands of a much larger customer base.
It’s important you’re prepared to amp up distribution, customer care, and other key business functions to drive growth. As you grow, keep reviewing the roles of each team member or department to see areas of the business you need to invest in further.
Roles may change, priorities certainly will, and you need to recognise these shifts as early as possible to react accordingly. Have regular conversations with all team members and pay attention to issues they’re flagging. Addressing these early warning signs can help you avoid major impacts down the line.
10. Mentors and top level guidance
As a Founder, you’re probably going to learn a whole set of new skills throughout the life of your startup. You might already know a lot, but you can always learn more and it’s important to know when to seek expert advice.
You may well need help when it comes to making the right business decisions, or focusing on the right areas of your strategy to scale the business. Reaching out to a business mentor can offer you invaluable insight and support.
Having someone who’s familiar with startups, and the challenges you face, can be reassuring and save you a lot of time (and money). A business mentor gives you access to a wealth of experience and know-how that they’ve accrued from running and driving their own successful businesses.
If you don’t have direct access to a mentor, you can access knowledge in other ways, such as podcasts, articles and books written by business experts. This won’t be the same as having someone who’s familiar with your specific business, but it’s a great start.
Check out our other articles for more tips, tricks and advice to help your startup succeed.
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